ASIC copping more media bashing for being seen as next to useless. Whats the use of having 'power' if takes years to make a half aRssed attempt to deploy the so called 'power' if at all? No wonder few if any have a good word to say about them!! I am surprised they have not been referred to as a 'pawless pussy' rather than 'toothless tiger'!! Seamisty
http://www.smh.com.au/money/super-and-funds/power-to-act-20101207-18ngn.html
Power to act
The chairman of the Australian Securities and Investments Commission (ASIC), Tony D'Aloisio, has come out in defence of the regulator for failing to move earlier against those who it believes have engaged in wrongdoing.
Addressing a meeting in Sydney last week, D'Aloisio said the ultimate risk for the success or failure of an investment was a matter for the market. He said it was up to investors to assess the risk being taken and the reward on offer and to diversify their investments.
''This system and approach was well understood by institutional investors but [less so] by retail investors,'' D'Aloisio was reported as saying. ''As a result, some retail investors have been disappointed at ASIC's performance.''
Advertisement: Story continues below D'Aloisio maintains that at the heart of such disappointment is ''an expectation gap in risk taking''.
ASIC has come in for criticism over its handling of the mess created by the collapse of Storm Financial, a financial planning firm, in late 2008.
The firm's strategy was to double gear its clients into the sharemarket - once, by advising the clients to borrow against their house and then again, by putting those borrowed funds into a margin loan. Though the advice was always very risky and goes against the most basic principles of sound financial advice, the clients loved it because they made loads of money when the sharemarket was booming.
D'Aloisio says that Storm investors would not have reacted well to ASIC trying to close down Storm at a time when they were making such good money. He also argues that ASIC did not have the power to close down Storm.
But ASIC has plenty of powers to deal with poor financial advice. Despite ample opportunities over the years, the regulator has never tried to test the extent of its powers when it comes to shoddy financial advice.
ASIC can act under Section 945A of the Corporations Act. That is the part of the law that requires a planner to have a ''reasonable basis'' for the advice but the Act does not say what constitutes ''a reasonable basis for advice''.
You would think that Storm Financial's model of recommending that retirees use their life savings to gear into the sharemarket with their houses on the line would fall well short of the mark.
But the regulator has never run a test case before the courts to flesh out what this really means. Maybe Storm did not need to be closed down but rather forced to reduce the risks that its clients were taking, perhaps with the threat of substantial financial penalties.
Rather than trying to clarify the law, the regulator's preferred tool is the ''enforceable undertaking''. This is a legally enforceable contract where the naughty firm admits to no wrongdoing and crosses its heart and promises to do the right thing in the future. This also usually involves immediate restitution of some of the financial losses suffered by consumers.
Until the regulator tests the extent of its powers in the courts and seeks substantial fines against wrongdoers, it is hard to see how the regulator can be taken seriously by those intent on doing the wrong thing.